How an employee reward system can curtail productivity

The common belief is that employees are motivated when they are rewarded for their good behaviour. However, this may do more harm than good. In this video, I explore how reward systems and policies can be discouraging the behaviour you want from your team.

Can rewards motivate behavior?

In a recent study on organisational behavior, they found that employee reward systems and policies can be counter productive and may even cause poor performance. This study looked into the effects of an attendance reward program rolled out to motivate employees to come to work on time. Those employees who came to work on time every single day for the entire month were given recognition. If, however, any of the employees came in tardy at any time during the month, they will not be eligible for this reward.

At the end of the program, the company found that the policy became counterproductive. In fact, the company discovered that they lost 1.4% of daily productivity!

What they found out was that some employees ‘gamed’ the system. Those who knew that they will be coming in late would instead not come to work at all and use their sick days, just to maintain their reward eligibility for the month.

Other employees, on the other hand, reverted back to poor behavior when they lost eligibility for that particular month. In some cases, they even became increasingly tardy.

What was interesting,  is that the program was found to have a negative effect on employees who were already exhibiting good behavior prior to the policy. The “good” employees were found to have developed poor behavior—the company observed that “good” employees had increased tardiness when they found themselves ineligible for the month’s reward.

How does motivation work?

Motivation, as it turns out, can come from two sources: internal and external. Employee reward systems and policies are examples of external motivations—these aim to influence people to behave in a certain way. Internal motivation comes from within—this means that a person decides for himself or herself to behave in a certain way.

Internally motivated people are those who take the initiative to perform well and develop their skills on their own. They are motivated by goals and objectives that they set themselves—they are motivated by the internal desire to be better.

Entrepreneurs like yourself are good examples of people who are motivated internally. You do it because you want to and you believe in what you are doing.

From the employees’ perspective, the study found internally motivated people are not motivated by external factors at all. In fact, they find it unfair to be rewarded for behavior that everyone should be doing to begin with—such as coming to work on time.

And those who are externally motivated to behave a certain way? It turns out they’re only motivated to “earn” the reward—but not necessarily motivated to perform better. When you take these rewards away or when they find out that they are not eligible for these rewards—they go back to their old ways, and even perform worse.

What does this all mean for my business?

What the case seems to suggest is that external motivation does not effectively influence people to behave positively. At best, the positive results are short-lived—but in the long term, the company will find themselves worse off.

“External motivation does not effectively influence people to behave positively. At best, the positive results are short-lived..”

Apparently, bribing people to perform turns them into mercenaries. It degrades, and demeans the work that they do. Besides, there is already an established “reward” for performance—and it’s called a  “salary.”

What seems to work is when we reward exemplary performance. If you need to motivate people to do what is expected of them, perhaps it’s time to rethink whether these are the employees you want to keep working with.

If you are interested to know more about what a business has to go through when facing exponential growth, you can download the first chapter of the book, ”$20K to $20 Million in 2 Years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that make you consider how you can turn your business from good to great.



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